As Covid Unfolds, These Securities Heat Up

SEVERAL OF THE top-earning stocks in the securities lending market this year made their way to the list due to some impact of the COVID-19 pandemic. Among the top five are Carnival Corp, which faced a $3 billion loss in the third quarter following a months-long No Sail Order, and Inovio Pharmaceuticals, which faced ups and downs as the company strove to develop a coronavirus vaccine.

Throughout the COVID pandemic, a number of industries have been roiled, from pharma, which is working to develop a vaccine, to transportation, which flatlined as the world went into lockdown. Even the communications industry was hit in certain areas; the dating app market, for example, was negatively impacted as social distancing rules and general apprehension precluded socializing as we know it. DataLend analyzed key sectors and securities impacted by the coronavirus pandemic in this look-back over the first three quarters of 2020—from the calm before the storm through to today.

One of the top-earning “COVID securities” in 2020 is INOVIO PHARMACEUTICALS INC (INO), which experienced a “biotechnology rollercoaster ride” as world events and news related to the firm’s potential coronavirus vaccine unfolded. The daily revenue generated in the securities lending market by this security closely mapped the global ebbs and flows of COVID cases, with numbers rising to a peak in July before dropping off over the summer months, followed by a second wave more recently.

INO utilization fluctuated between 77% and 99% from March through September as the firm revealed a series of updates regarding its Phase 1 trial of a candidate vaccine. On-loan and total lendable balances grew over the same period as securities lenders turned their attention to this security. The security price peaked at $31.69 in July before dropping off more recently as anticipation of Phase 2-3 trials was muted following a “partial clinical hold” placed by the U.S. Food and Drug Administration (FDA) in September. Through the end of Q3 this year, INO has generated more than $47 million in revenue for lenders. For more information on INO, see Figures 1, 2 and 3.

In the Communications/Interactive Media sector, the #1 revenue earner over the first three quarters of 2020, with $123.9 million in lending revenue, was MATCH GROUP INC (MTCH), as depicted in Figure 4. Stock in the online dating company, which reportedly controls over 60% of the dating app market across dozens of brands, faced downward pressure in the first quarter as the CEO stepped down in late January following a Q4 earnings miss. Between mid-January and mid-March, the security price dropped from $92 to $50 a share as lockdowns and other social distancing measures were implemented (see Figure 5). Analysts and consumers alike were skeptical of the prospects of dating apps during a global pandemic. Further, a GDPR data breach in early April did not help the case. Lending revenue spiked from April through July.

The end of March and the full second quarter showed much more promise for Match Group as government assistance programs and a Q1 earnings beat helped to steadily increase the security price to over $100 a share. Short activity followed, with average fees exceeding 1,000 bps leading to a dramatic revenue accumulation for the first half of 2020.